Exchange Rate Management for Commodity-Dependent Countries: A Zambian Case Study

Abstract

Historical evidence illustrates how the interplay between fiscal, monetary and exchange rate policy has proved essential in overcoming the commodity trap. Commodity-dependent countries that successfully managed to move on a sustained long-term development path — such as Malaysia, Thailand, Indonesia, Chile and Botswana — carried out counter-cyclical macroeconomic policies.¹ Yet, at present, further to the implementation of liberalization and privatization reforms in the 1990s, it transpires that the scope for macroeco- nomic management in the developing world is narrower than in the past.